In today’s mortgage environment, many REALTORS® are sharing the adage of “Date the rate. Marry the house.” to keep things in perspective.
The expression encourages homebuyers to remember the long-term commitment they’re making is with their home – not the interest rate.
Viewing the interest rate as a shorter-term commitment can be less intimidating since refinancing in the future is a viable option to secure a lower rate.
Remember to Refinance
“It’s a fact that mortgage rates fluctuate so recent homebuyers should keep an eye out and be ready to lock in a lower rate when they go down,” says Kim Curtis, a broker with Shorewest Realtors and loan officer with Wisconsin Mortgage Corp. “As a rule of thumb, refinancing makes the most sense if the new rate is three-fourths to one percent lower than your current rate.”
For those who might think refinancing is a hassle, it’s good to know that it’s typically a quicker process since it doesn’t require the same amount of paperwork as an original mortgage does.
Don’t Try to Time the Market
Trying to “time” the mortgage market carries risk for buyers since they may miss the opportunity to purchase the home of their dreams.
“In today’s competitive homebuying market, you shouldn’t wait for rates to come down and then make an offer,” says Curtis. “Since there’s still a shortage of inventory, holding off isn’t a viable option because someone else will probably snap up the home you want.”
Today’s Rates Are Normal
New homebuyers may have gotten too accustomed to the low interest rates of recent years. In fact, today’s rates are more typical.
“The extremely low rates of the last few years are the outliers,” says Alex Leykin, CEO of A+ Mortgage Services, Inc., in Milwaukee. “The 6-8% mortgage rates we’re seeing today are actually the standard. The market is simply coming back into balance.”
Advantages of Buying
When the discussion turns to buying versus renting, there are a few things to consider.
First, housing is a fixed cost. Everyone needs housing and paying for it happens either by renting or buying.
“If you think about the fact that money has to come out of your pocket for housing, you should consider who you want the money to end up benefiting – a landlord or yourself,” says Leykin.
Second, the amount of a home payment remains the same while rent often increases year over year.
“In effect, by buying a home, you’ve stabilized your financial situation because a mortgage is a consistent amount each month,” says Leykin.
Other advantages that carry long-term value include:
- Your monthly mortgage payment ultimately goes back to you because you’re building equity in your home.
- Homes typically increase in value. That means, when you’re ready to sell, you can get more than you paid for your home.
- There are tax advantages since property taxes and mortgage interest can be deducted.
- A home provides family stability. Studies have shown that the children of those who own a home have better academic outcomes.
- You can make it your own. Owning your home means you can decorate, remodel and upgrade it any way you like.
- There’s privacy. Instead of sharing walls with your neighbors and hearing parts of their life, the space is entirely your own.
The REALTOR Advantage
When making the commitment to buy a home, a trusted and knowledgeable Realtor paves the way for a smoother experience. A Realtor guides clients through what is often the single biggest financial transaction in life and provides much-needed insight and expertise throughout the process.
In addition, there is a difference between an agent and a Realtor. A Realtor is a member of the National Association of REALTORS, is committed to a Code of Ethics and has the expertise to find the right home for everyone. Look for the “R” to determine if your agent is a Realtor.
Locally, the Greater Milwaukee Association of REALTORS is a 5,000-member strong professional organization dedicated to providing information, services and products to help Realtors help their clients buy and sell real estate. Visit gmar.com for more information.